Epsilon Archive for Student Projects

Abstract

Farmers Cooperative has in recent years developed from national markets to cross-border, international, collaborations. One example is the merger between the Swedish dairy company Arla and Danish MD Foods, where the companies collectively are sought to reduce transaction costs and thus improve efficiency. The Swedish market for commodities (fertilizers and pesticides) in agriculture has for many years been dominated by a few large players, with little opportunity for grain associations and local grain companies to offer their customers a varied range of commodities with a competitive pricing.

To change this state, a majority of Swedish and Danish grain associations and local grain companies have established a trans-national cooperation. Through the establishment of the organization DLA Agro, they offer their customers a good variety of products with competitive prices. This study investigates thus according to the theory of cooperative models to what extent and how the DLA Agro helps to create benefits for the Swedish member companies. Crucial to this analysis is to DLA Agro's special organizational features can be expected to have significant bearing on the transaction and agency costs, which member companies are experiencing. Organizational features means that it is a federal organization and that it is trans-national cooperation, which has consequences for the financing, governance and operations.

The method for conducting the survey consists of qualitative interview techniques with detailed interviews of every Swedish association and companies connected to the DLA Agro. The interviews indicate that members largely feel that the DLA Agro has a good relationship with the Swedish member group. The fact that the member group is relatively small in number and largely homogeneous with regard to the benefits members want out of it helps to contribute to the cooperation. Also that DLA Agro has a limited business portfolio with few products makes it easier for the cooperation to focus on reducing transaction costs.

An important factor explaining the success of the cooperation is that it does not store any collective capital within the DLA Agro. This facilitates control of the DLA Agro, as potential conflict of interest on what the collective capital is to be invested in reduces. The fact that DLA Agro has inscribed in the statutes that members must sign a declaration of loyalty and the obligation to purchase ensures DLA Agro that the members will purchase every year. By doing so the risk of getting passive members with too divergent business interests reduces.

The survey also shows that future conflicts may arise. This is because a number of respondents would like the opportunity to trade in seeds. This could cause problems because a number of the members in the Swedish member group are also grain producers.